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Rausch v. Allstate Insurance Co.9/8/2005
N.W.2d 87 (Minn. App. 1993); Tri-Par Investments, L.L.C. v. Sousa, 680 N.W.2d 190 (Neb. 2004); Safeco Ins. Co. v. Capri, 705 P.2d 659 (Nev. 1985); Community Credit Union of New Rockford, N.D. v. Homelvig, 487 N.W.2d 602 (N.D. 1992); GNS Partnership v. Fullmer, 873 P.2d 1157 (Utah App. 1994); Cascade Trailer Court v. Beeson, 749 P.2d 761 (Wash. App. 1988). The Oklahoma Supreme Court has acknowledged Sutton but has not yet blessed it. See Travelers Insurance Companies v. Dickey, 799 P.2d 625 (Okla. 1990) (distinguishing Sutton and holding that a roofing contractor was not a co-insured under the owner's policy, notwithstanding a provision in the roofing contract requiring the owner to maintain property insurance).
Not all of those courts have rested their decision entirely on the assumptions made in Sutton, however, but have offered additional "law and economics" justifications for the rule. In DiLullo, supra, 792 A.2d at 822, for example, the Connecticut court noted the substantial criticism of Sutton's view of the tenant as a co-insured and agreed both that (1) "under traditional rules of insurance law, a tenant is not a coinsured on his landlord's fire insurance policy simply because he has an insurable interest in the premises and pays rent," and (2) under "traditional rules of contract law, whether subrogation would or would not apply ordinarily would depend, in large part, on a case-by-case analysis of the language of the insurance policies and leases involved." It concluded, however, based on "matters of policy and fairness," that "the Sutton result is sound as a matter of subrogation law and policy." Id. The court expressed concern, especially when dealing with a multi- unit structure, that allocating responsibility to the tenant to maintain sufficient insurance in anticipation of a subrogation claim would be "untenable" in that it might require tenants to insure for an amount necessary to cover the replacement cost, not just of their unit, but of the entire building. That would produce layers of insurance to protect against the same loss, which the court concluded would be economic waste.
Several of the Sutton followers have echoed that concern. The GNS court concluded that, at least for residential tenants, the Sutton presumption was "the most efficient way to allocate insurance costs." GNS, supra, 873 P.2d at 1164. See also North River, Ins. Co., supra, 804 A.2d 399. Other Sutton followers have accepted more the notions that (1) because the cost of insurance is presumably included in the rent charged by the landlord, the tenant has actually paid the premiums on the policy and ought to be regarded as a co-insured for that reason, or (2) insurance companies "expect to pay their insureds for negligently caused fires and adjust their rates accordingly." See Safeco Ins. Co. , supra, 705 P.2d at 661; also Tate v. Trialco Scrap, Inc. 745 F. Supp. 458 (M.D. Tenn. 1989); Community Credit, supra, 487 N.W.2d 602; New Hampshire Ins. Group v. Labombard, 399 N.W.2d 527 (Mich. App. 1986). There is clearly not a single accepted theory, even among the Sutton followers, and there is certainly no general consensus that landlords and tenants are co-insureds. Notwithstanding language in some opinions to the effect that Sutton represents a majority view, that is clearly not the case. Only a handful of courts have actually embraced the Sutton rationale.
At the other end of the spectrum, a number of courts have taken an opposite approach and permitted an insurer to bring a subrogation claim against the tenant absent an express or implied agreement precluding such a claim. Some of those courts have looked, in making that determination, to whether there was an agreement by the landlord either to maintai
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